Innovation with and without patents - an information-theoretic approach

Abstract

Patents are among the most common proxies for innovation, and a long-standing discussion is therefore to what extent patents can be used to monitor trends in innovation activity. This study proposes a new straightforward approach to measure the amount and quality of information content of a data source, where information is approached as a transmission from a source to a receiver through a noisy channel. This framework is applied to measure information about actual innovations contained in the patent system, and gives empirical estimates based on a database matching 4460 Swedish innovations (1970-2015) to international patents. The results show that most innovations were not filed for patent and that among those that were, 43.9% of all innovations, a small fraction can be identified with patent quality data. The estimates suggest that overall patents capture 15% of all information about innovations, equivalent to an information loss of 85%. The overlap between the patent and innovation systems is hence more modest than is often assumed. This accentuates the need to develop versatile and multidimensional approaches, based on both patents and other indicators, in order to monitor and stimulate various aspects of innovation.